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Can you qualify for a USDA loan after a foreclosure?

April 22nd, 2016 by usdaadmin

Can you qualify for a USDA loan after a foreclosure?

When it comes to previous foreclosures, don’t be scared – be aware! While many think that a previous foreclosure may end their dream of regaining homeownership, today’s video tip will go into details about how you can qualify for a USDA loan after a foreclosure.

Before we get started, don’t forget to download our USDA blueprint for success with the link below. This free guide is designed to break down the process step by step and is a great educational resource for the real estate community.

In 2013, Corelogic reported that the number of foreclosures since 2008 was estimated at 4.4 million. How do you qualify for a USDA loan after a foreclosure

With that being said, many potential homebuyers are back on the rebound and trying to qualify to purchase a home.

Thankfully, the USDA program can be flexible in these situations.

The waiting period to qualify for a USDA loan after a foreclosure is generally three years from the recorded date of the foreclosure. Depending on the factors involved, it may be possible to qualify with an exception for a time period less than that.

How do you qualify for a USDA loan after a foreclosure

Can you qualify for a USDA Loan after a foreclosure?

USDA qualifying guidelines state the following regarding previous mortgage foreclosure:

“An applicant is generally not eligible for a new guarantee, if during the prior three years the applicant’s previous real property was foreclosed on or they have given a deed-in-lieu of foreclosure.”

In cases when a foreclosure has been less than 3 years, exceptions are possible but should be made only in the following situations:

  • Was the situation which cased the credit problems temporary in nature?
  • Was the situation beyond the applicant’s control?
  • Have the circumstances been removed and resolved for the 12 months prior to application

Examples could include, but are not limited to the following:

  • Temporary loss of employment
  • Delay or Reduction in Benefits
  • Illness
  • Dispute over payment for defective goods or services

Documentation will need to be provided by the potential applicant in order to support their request for a possible exception.

How do you qualify for a USDA loan after a foreclosure

It is also important to note that the following limitations will apply when seeking a possible exception to the 3 year waiting period when trying to qualify for a USDA loan after a foreclosure:

  • The inability to sell the property due to a job transfer or relocation to another area does not qualify as an extenuating circumstance.
  • Divorce is not considered an extenuating circumstance. However, an applicant whose loan was current at the time of a divorce in which the ex-spouse received the property and the loan was later foreclosed may qualify as an exception.

Remember, not all lenders have experience with processing and closing USDA loans.  As an approved USDA loan program lender, we are known for our program expertise and have specific systems in place to process USDA loans from pre-qualification to closing.

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